Real Estate Boards Are Going on the Offensive

By MARK McCAIN

Published: September 4, 1988

When a judge overturned a zoning restriction last month aimed at protecting factory tenants in New York City's garment district, the ruling marked a new sort of victory for the Real Estate Board of New York.

Since its inception nearly a century ago, the heavyweight trade group has not been bashful about flexing its muscle. But until recently it never would have mounted a lawsuit against the City of New York.

On Tuesday, the board will take another step in its widening political agenda: It will bring Mayor Edward I. Koch to a lectern in the University Club to initiate a series of forums at which top real estate executives will question mayoral candidates about their plans for New York City.

The board's new role as a litigant and questioner is part of its transformation during the 80's from an old-boys' club - more petulant than productive - into an aggressive force in shaping public policy.

''For the first time in decades, the quality of their ideas is approaching the quality of their attire,'' said Mitchell L. Moss, director of the Urban Research Center at New York University. ''Traditionally, New York City politics and real estate has revolved around rent regulation, but now the Real Estate Board is going beyond that. They realize there's a policy vacuum in the city - involving overall development issues - and they're filling it.''

Across the nation, realty groups are filling similar vacuums with research, legislative and legal talent. The Houston Board of Realtors, for example, now routinely develops analytical arguments against zoning laws, which have repeatedly failed to win approval in that city. ''If zoning was going to happen in Houston it should have happened 50 years ago,'' said Frank Fitzgerald, president of the board.

No realty group has abandoned the time-honored tools of political donations and discreet lobbying, but those tools have become part of broader strategies. And the trend concerns some elected officials, who fear the influence that developers bring to city halls and state capitols lacks an adequate counterbalance.

''The burden, in effect, is with government representatives to be sure they give equal weight to groups that have less money,'' said Councilwoman Ruth W. Messinger, a Manhattan Democrat who is a frequent adversary of developers. ''Almost by definition, real estate people have access to large amounts of money - and they have used a great deal of it beyond simply lobbying and funding campaigns.''

Yet despite all their money, real estate people tend to be prudent risk takers. And the newest venture of the realty board in New York City - its political forums - may prove to be a cost-effective investment in politics.

After beginning the series of forums with Mayor Koch, the board will have other elected officials interested in a run for the mayoralty, among them Comptroller Harrison J. Goldin and City Council President Andrew J. Stein, up for questioning later in the fall.

The board is eager for media coverage of the forums - hoping candidates will commit publicly to measures that they otherwise might sidestep under pressure from groups with more voting power, like neighborhood merchants, who have been pressing for commercial rent regulations.

''The big question as we approach the 90's is: Will we have the right kind of leadership to direct the city and keep it a leading center for business, real estate and industry,'' said Jerry I. Speyer, a developer, and chairman of the Real Estate Board, which has about 50 employees and 5,500 members. ''To help the process along, we decided to give the mayoral candidates an opportunity to address major leaders of the real estate industry.''

The forums may become the most visible piece of an extensive government monitoring system the board has built during the tenure of Mr. Speyer and his predecessor, Larry Silverstein, another developer.

Much of the action occurs during the formative stage of rule making. ''We have become very much an activist board - no longer waiting for the city to pass a bill and then complain about it,'' said Steven Spinola, who moved over from his job as head of the city's Public Development Corporation three years ago to become president of the board. ''We try to be with the policy makers when they are sitting down.''

Late last year, for instance, the board dissuaded the city's Department of Finance from subjecting real estate investment partnerships to a local unincorporated business tax. The board argued that the change would push partnerships out of New York City and create a net income loss for the city.

''The weight of their membership makes the board a voice to be reckoned with,'' said Abraham Biderman, a former Finance Commissioner who now heads the city's Department of Housing Preservation and Development. ''They have a good research division. It's not that their data cannot be challenged, but quite often it's on target.

''They are particularly powerful in Albany, where they have been successful in stopping legislation that would be detrimental to their membership,'' he said.

From asbestos to zoning, government decisions affect the profits of real estate owners and developers. And well-financed research departments have given realty groups a new way to influence public policy. ''They are beginning to realize importance of research and ideas,'' said Mr. Moss of New York University, ''as compared to political contributions and name dropping.''

A few months after Southern Bell began charging builders in Georgia a $160 fee for burying the electrical feed to each new house, real estate groups began a counterattack.

''We hired a lawyer and several of our members volunteered endless hours,'' said Don Wix of the Home Builders Association of Metropolitan Atlanta. ''We thought Southern Bell had a pretty weak justification for collecting the extra surcharge.''

Ultimately, the Public Service Commission of Georgia agreed with the builders, and it ordered the telephone company to refund about $4 million in fees and interest last fall. ''We asked all the builders who received refunds for a contribution back into a legal defense fund,'' said Mr. Wix. ''Now we have a war chest of about $50,000, which isn't a bad start.''

In earlier decades, realty groups were more apt to lead than follow. But since then, they have adopted techniques ranging from courtroom assaults to letter-writing campaigns to promote their interests.

The Greater Boston Real Estate Board sends out briefing material to a ''legislative network'' of nearly 1,000 people who inundate government officials with letters on various issues. ''As a result of these efforts, a bill dealing with the sale of houses that contain lead paint was significantly recast last year,'' said Joy Conway, a board executive.

The draft legislation called for owners to remove all lead paint before selling properties, but the new law says only that an owner must give prospective buyers a 10-day inspection period and alert them to the lead-paint law and the dangers of lead poisoning.

In San Francisco, experts from the local Board of Realtors are working with a city committee studying a new safety code aimed at reducing earthquake hazards in masonry buildings. ''We don't oppose the code, but we question what's the best way to deal with the hazards,'' said James C. Fabris, a board executive. ''Where will the financing come from?''

Not always do realty groups prevail. When the Chicago Board of Realtors challenged a tough tenant-rights ordinance that had been adopted - arguing in Federal Court that the measure usurped the constitutional rights of property owners - it lost the suit in 1986, and also its appeal last year.

Nonetheless, courtrooms are becoming a more common destination for realty groups. ''Last year we decided it was critical for our industry to be able to take whatever action necessary in the courts to protect our interests,'' said Mr. Speyer of the New York Real Estate Board. ''We assessed our members and now we have close to a million-dollar war chest.''

In the garment-center case, the board protested a zoning change that required landlords of certain buildings to preserve as much space for garment manufacturing as they converted to office use.

While declining to rule on the board's basic contention - that the change amounted to an unconstitutional taking of property - Justice Carmen Ciparick of State Supreme Court said the city must prepare an environmental impact statement before proceeding with the new zoning.

''It was a false solution that turned out to be an illegal solution as well,'' said Mr. Spinola of the board. ''There's a fundamental issue here: If the city takes away the rights of owners in one part of Manhattan, what will it try to do next?''

Among local realty groups, the New York board has the deepest pockets, with an annual operating budget approaching $4 million and a political action committee that distributes about $200,000 each year. But critics say its perspective rarely extends beyond the skyscrapers of Manhattan.

''The people who build affordable housing in Harlem or apartments in Queens aren't represented,'' said Alexander P. Grannis, chairman of the New York State Assembly's Committee on Housing. ''The Real Estate Board is comprised of the guys who build huge office building and luxury condos in midtown and downtown Manhattan.''

But developers on the board maintain that they have the same interests as New York City at large: Steady long-term growth that will help the city maintain its edge as a financial, commercial and cultural capital.

''Today, though, the organization is not only a spokesman for the most responsible real estate people in New York, but it also has a great deal of sensitivity about the well being of the city,'' he said.

As an example of that evolution, Mr. Silverstein points to efforts by the board to build 3,000 middle-income residences and two schools at no profit on city-owned land. ''A decade ago,'' he said, ''the board never would have even dreamed of a project like that.''

Back then, the board served as a research bank for its own members, but lacked the manpower to extend its reach much further.

''When I got here eight years ago,'' said Arthur Margon, senior vice president for research, ''we decided it was important to go beyond being negative and just talking about rent control and high tax rates. That meant we had to set up a well-staffed operation that could work day-to-day with the Buildings Department, the Planning Department and lots of other city agencies.''

When the city drafted zoning revisions for west midtown Manhattan, where a zoning incentive expired earlier this year, the board argued against several changes.

''With the expertise of board members who are architects,'' Mr. Margon said, ''we were able to demonstrate that a lot of buildings everyone liked couldn't be built under the proposed regulations.

''We're always making proposals to city agencies,'' he said. ''They don't accept them all, but thoughful proposals are a lot better than just yelling: This is bad, that is bad.''